Lawmakers propose fees for insurers not a part of Hawaii health exchange

March 11, 2014

HONOLULU - Hawaii lawmakers are proposing charging a fee to insurers that are not participating in the state's insurance exchange under President Barack Obama's federal health care overhaul.

The fee would help prop up the financially troubled Hawaii Health Connector. The exchange has enough money to cover its bills for this year - but not beyond that, without some help.

"This is not something we want to do," said Rep. Angus McKelvey, chairman of the House Consumer Protection and Commerce Committee. "It's federally mandated that we have to have our exchanges be sustainable."

The unspecified fee would be charged by the state insurance commissioner until mid-2018, based on the number of people the carrier insures.

The exchange was established with $205 million in federal grants and has asked the federal government to spend the money more slowly than originally planned. As scheduled, it is supposed to spend those funds by the end of the year. As of Dec. 31, the exchange planned to spend nearly $139 million in federal grants in 2014.

The new insurance fee is part of a flurry of House proposals that were rolled into one overarching bill (HB 2529) now being considered by the Senate.

The bill also would create a legislative oversight committee to review the exchange's financial and operational plans.

"We want oversight . . . so we know exactly every penny they want and what they want to spend it on," said McKelvey, a Democrat.

A proposal to have the state take over the exchange previously was part of the main House bill, but was taken out of consideration for several reasons. First, if the state had taken over the exchange, the assisters who help people sign up for coverage would have become state employees, sending state costs skyrocketing, McKelvey said.

The state also would have assumed the exchange's liabilities, exposing the state to even further financial risk. In addition, the Legislature cannot legally disband a private nonprofit, he said.

Another proposal (HB 2581) calls for seeking waivers from some requirements of the Affordable Care Act to accomplish goals like downsizing the connector. A task force would come up with ways to improve the operation.

"It provides a lot of flexibility to go beyond or to address health coverage in ways that were not so prescriptive under the Affordable Care Act," said Beth Giesting, who heads the Office of Healthcare Transformation for Gov. Neil Abercrombie.

A Senate proposal (SB 2470) would reduce the number of members of the connector's board of directors. The board needs more representatives from the private sector, because as it stands, the members primarily are from insurance providers and the state, McKelvey said.

Eventually, the bills from both chambers will be hashed out in conference committee, McKelvey said.